Retirement age changes - a shock for UK workforce

ï Majority of workers unaware of minimum retirement age rising
ï Opportunities for employees to increase pension contrbutions, while employersí costs on benefits and pensions will rise

Employees over 50 who are planning to retire in the next few years could be in for a shock. The minimum retirement age is set to rise from 50 to 55 in April 2010, but only a quarter of UK workers are aware of this change, according to new research released today from Aon Consulting, the leading employee risk and benefits management firm.

A mere 24% of the 4046 respondents to the national survey, and less than a third (31%) of workers aged 45 – 54 (those potentially most affected by the changes), said they were aware of the increase to the minimum retirement age. A significant amount of workers could effectively be forced to work up to five years longer than they had planned.

Similarly, less than half (46%) knew that the state pension age for women is rising to 65 in 2010, possibly forcing millions of women into working for up to five extra years, particularly if they have planned to use the State pension as the bulk of their retirement income.

The changes to both the minimum retirement age and the State pension age are due to the UKís ageing population. People are expected to live longer than previous generations, so by raising these key dates, the amount of time people can contribute to private and State pensions is increased, while the time available for them to draw on the pensions is reduced.

While this means that employees unaware of retirement age changes could have to continue working for longer than they anticipated, there is a silver lining, as this extension provides the opportunity for people to increase their annuity by paying into their pension for longer.

However, while the changes are potentially beneficial for employeesí finances, the opposite could be true for employers, as benefits become increasingly expensive. This is due not only to the increased health demands of older workers but also due to continued employer pension contributions.

Commenting on the findings, Helen Dowsey, principal, Aon Consulting said:
ìThese findings have clear implications for Britainís workforce and their employers. It is disappointing, but not entirely surprising, that so few people are aware of changes to the minimum retirement age and the State pension age.

ìEmployees should double check when they are able to retire, no matter their age. This applies to both the State pension, but also to many private pensions that have ëNormal Retirement Agesí at which members can start to draw upon their savings. We have seen massive legislative changes to pensions and unprecedented volatility in pension investment: the workforce needs to forward-plan for retirement to understand and respond to these changes and market conditions.

ìEmployers must not only help their workforce understand the implications of retiring but also review and prepare for alterations to their own budgets. With an older workforce, benefits costs are going to rise and employers must be prepared.î